The Epic Story Of How A 'Genius' Hedge Fund Almost Caused A Global Financial Meltdown

But by 1998, that firm was primed to expose America's largest banks to more than $1 trillion in default risks. The demise of the firm, Long-Term Capital Management (LTCM), was swift and sudden. In less than one year, LTCM had lost $4.4 billion of its $4.7 billion in capital.

The entire story is recounted in Roger Lowenstein's book, 'When Genius Failed', with details on the specific strategies and financial theories employed by Long-Term. It's an absolute must-read for anyone working on Wall Street, so we've summarized the basics for you in ten slides.

This story has all the players - the Federal Reserve, which finally stepped in and organized a bailout, and all the major banks that did the heavy lifting: Bear Stearns, Salomon Smith Barney, Bankers Trust, J.P. Morgan, Lehman Brothers, Chase Manhattan, Merrill Lynch, Morgan Stanley, and Goldman Sachs.

In desperate need of a $4 billion bailout, the crumbling firm was at the mercy of the banks it had once snubbed and manipulated.

Consider this a history lesson.